With the U.S. presidential elections just 100 days away and Vice President Kamala Harris recently replacing President Biden as the presumptive Democratic nominee, Wall Street is now weighing in with predictions of how the Oil & Gas sector is likely to fare under either candidate.
Under most key metrics, the U.S. oil and gas industry has flourished under the Biden administration despite this being the most pro-renewables government ever thanks to game-changing legislation such as the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA). Profits by the 5 largest publicly traded oil companies, namely Exxon Mobil Corp. (NYSE:XOM), Chevron Corp.(NYSE:CVX), BP Inc.(NYSE:BP), TotalEnergies SE (NYSE:TTE) and Shell Plc (NYSE:SHEL) rocketed to $410 billion during the first three years of the Biden administration, a 100% increase compared to a similar period under Donald Trump’s presidency thanks to the oil price rally triggered by Russia’s war in Ukraine.
Oil and gas investors have been handsomely rewarded under the Biden administration, with energy shares jumping 117% since Biden took over at the Oval Office vs.-49% decline for the comparable period under Trump.
And now Citi has predicted that the U.S. energy sector under Harris would largely be a continuation of Biden’s policies while another Trump presidency “could be net bearish due to trade tariffs, oil-and-gas-friendly policies/deregulation, and pushing OPEC+ to release oil to the market.”
Previously, Trump led delegates at the Republican convention in raucous chants for the U.S. to “drill, baby, drill,”obviously a bad thing for oil prices. Republicans have repeatedly railed against Biden’s climate policies, blaming them for compromising U.S. “energy independence” by limiting U.S. oil and gas production and raising fuel prices.
Biden [in]famously canceled the Keystone XL Pipeline project designed to bring in more Canadian crude to U.S. refineries and paused new LNG export permits pending an environmental review in 2023 ostensibly in a bid to woo climate voters.
Still, U.S. crude and natural gas production have surged to record highs under Biden: crude oil production in the United States, including condensate, averaged 12.9 million barrels per day (b/d) in 2023, breaking the previous U.S. and global record of 12.3 million b/d, set in 2019. Average monthly crude oil production set a new monthly record high in December 2023 at more than 13.3 million b/d.
Goldman Sachs has predicted that U.S. production will grow by another 500,000 bpd in the current year, accounting for 60% of non-OPEC production growth.
It’s not clear how Trump will encourage U.S. producers to ramp up production with his message going contrary to top U.S. oil executives that have in recent years shown little appetite to dramatically raise production, instead embracing fiscal discipline and a focus on shareholder returns.
As you might expect, the renewable energy sector could find itself in trouble under a second Trump presidency: energy analytics firm Wood Mackenzie has predicted that another Trump term would increase carbon emissions by 1 billion tonnes more by 2050 and delay peak fossil fuel demand by 10 years beyond current forecasts. WoodMac projects ~$7.7T in overall spending by the U.S. energy sector through 2050 under current policies, a figure that could be cut by $1T under Trump through reduced policy support for low carbon energy and infrastructure improvements. WoodMac says this could turn into a positive for natural gas, boosting demand by 6% or 6B cf/day by 2030.
On another bullish note, Trump is likely to at least try and limit Iran’s surging oil exports and also pump the brakes on the EV push. Last week, commodity analysts at Standard Chartered reported that Iranian oil exports have spiked, with Iran using Malaysian waters as a conduit for ship-to-ship transfers of Iranian oil.
According to StanChart, China’s crude oil imports from Malaysia clocked in at 1.456 million barrels per day (mb/d) in June, the second-highest monthly average on record. StanChart says that Malaysia’s crude oil output is about 0.35 mb/d while exports usually average 0.2 mb/d, implying that the vast majority of the oil that China imports from Malaysia was not produced in the country. Iran’s oil exports have rebounded under Biden as the U.S. and its allies hoped to strike a new nuclear deal with Tehran following the Trump administration scuttling the Joint Comprehensive Plan of Action (JCPOA) deal of 2015. Under Trump, Iran’s oil production tumbled from 3.8 million barrels per day in early 2018 to less than 2 mb/d in late 2020 before rebounding to 3.2 mb/d under Biden.